VOL. 1 PRELIMINARY UNEDITED TRANSCRIPT BOUSE OF ASS~~LL FOR THE PERIOD Tb~DAY, JULY 19, 1979 NO. 5

July 19, 1979 Tapes 143 - 146 The House met at 3:00 p . m. Mr . Spea ker in the Chair. MR. SPEAKER(Si.lmns): DR. COLLINS : SOME HON • MEMBERS: The hon . the Minister of Finance. Hr. Speaker. Hear, hear !

MR. SPEAKER : It is very fitting indeed tbat this, the fll'St Budget of this new Government should be presented in a fiscal year which marks the fading days of an old decade and the dawning of a new era- with a fresh energetic Administration.

Today, as this Budget spans the dividing line between the eJtperiences of the 1970's and the pros peelS for the 1980's, I am confident that the vitality and determination of this new Government will provide the leadership to establish new directions in our fmancial affain, so tbat we may ensure the future prosperity of our Province and its people, through the uwtitnization of our natural wealth. I should make it clear at the outset. that it is not possiblefortoday's Budget to reflect all of the aims and objectives of tbe Peckford Admini&tration.

In many respects. due to time con.nraints, this Budget represents a ~bold the line" approa-ch for the nen silt or seven months, durin& whlcb time Government will reflect on existing programs and services and prepare the strategy to integrate those of a high priority with the policy objectives of the new Administration . As the Throne Speech stated, this Government will in the months ahead develop a five-year plan based upon sound financial management which will reflect fiscal realism and expenditure restraint tied in with an economic development strategy to guide us through the 1980's.

HISTORICAL PERSPECTIVE It is always helpful to look back before launchlng fonh anew, and with that thought in mind 1 would like quickly to review the economic past of our Prov ince. The development policies which Newfoundland has witnessed during this century have ta.lcen many directions and it is a matter of hi.storic fact that often valiant anempu to develop a strong provincial economic base met with disappointing results. At an early stage. Newfoundland strived to develop and construct a trans­ Island transportation system - fint the railway; and then more recently the Provincial

section of tbe Trans Canada Highway. While our forest and mining industries were eventually developed by private entrepreneurs this industrial activity came only after the granting of concessions and rights, which in many

cases, would not be acceptable in today's terms. The Province is not now receiving a fair economic rent from much of our natural wealth. Again, in more recent decades, we bave witnessed excessive optimism associated with certain attempts at industrializing our Province. We became disillusioned when large industrial prospects which looked so promising initiaUy proved unsuccessful and ~ome resources could not be developed to their potential as quickly as we bad hoped. Those were the frustrations of the past which we must now leave behind.

In more recent years, new hope has arisen, and there can be no question that this revitalized enthusiasm is well warranted . The increased demand that the world has placed on our fishery resource and the stimalation that it bas provided for our industry, is the most visible evidence of concrete economic progress. It is unfonunate that the flSJlery was so poorly regulated in the l 960's r.hat the vaJaable resource was almost desttoyed throagh over-exploitation. Nevettbeless, conaervation and management measure s have now been instituted and the fiShery is weU on its way to becoming a thriving saccess.

Additioaally, we now have other exciting prospects associated with the escalating va.tae of energy . These include our hydro-electric potentia.l, and the good possibility of offshore oil and gas. From numerous vantage points, the Newfoundland economy stands in far better shape today than at any previous time in our history . We have a sizea ble local market . We bave a substantiaUy better tra.ined and educated worlt force. We are witnessing the benefits of the servicing and manafacturiog spin-offs of resource-based industries .

FinaUy, our tremendously improved transportation networlc complements our industrial expansion . Such is the base , therefo re, from which this Budget looks forward to influence the medium and long term prospects of our economy . I must re~mpbasize that the strategy of this Government will be realistic , based on attainable prospects for short term progress while not tempering oar aspirations for the futare .

Tbe challenge of this Government is, to take what we now bave and mold an economy consistent with today 's resources and technology, while always endeavouring to secare the preservation and enrichment of the Newfoundla nd way of life. Let us now turn to a consideration of the financial performance of the Province in 1978-79 and to an analysis oftbe economic performance in tbat year and the outlook for 1979. 1971--79 FINANCIAL PERFORMANCE C~~nent Acc:oaat An examination of the actual curTCot a ceo ant results for the 1978-79 fi.sca1 year indicates variances from the budgetary objectives establilbed last year.

The net effect of these fluctuations was very poaitive aod Government is oow refiec:ting a contribution to capital accoant of $20,900,000 as compared to Sl 1,100,000 projected in the approved estimates . 340

However, net capital expenditut'ell exceed the original estimates by SS0,700,000 primarily because of a payment of $63, Ill ,000 to retire the long term debt of Labrador Linerboard Limited , which had been guaranteed in the late 1960's. It should be noted that these funds were immediately repaid to the Province and recorded in the accounts as a non-budgetary receipt.

The net decline in total fmancial requirements is partia.lly attributable to an increased contribution of $9,800,000 from the current account and to reductio ns in capital expenditures as a result of unavoidable delays in the implementation and pr'Jgress on certain capital programs. ECONOMIC REVIEW AND OUTLOOK 1978 Performance Newfoundland's economy sho wed signs of an upturn in 1978. Fish landings increased by 16.3%and shipments of manufactured productS(primarily newsprint) increased 14.J%.

Notwithstanding these encouraging factors, the statistical measure of economic activity indicated a net decline of I. 7% in the Gross Domestic Product . This was primarily attributable to the strike against the iron ore companies in Labrador and while personal incomes increased moderately overall throughout the Province , the Joss in wages caused by tbe strike offset the teal growth. There are several very positive factors which must be illustrated in order to provide a realistic assessment of our economic performance.

Perhaps Oile of tbe most encouraging developments was tbe strong improvement in employment, with 5,000 more Newfoundlanders being employed, than in the previous year. It is significant to note tbat this pronounced improvement was concentrated in the fisheries and service sector.;, without growth in the public service.

Another key element to be considered is that, despite a resurgence of inflation largely due to increased food and petroleum prices and the decline of the Canadian dollar. retail sales increased by 14.2% which clearly reflects a genuine improvement in consumer confidence in this Province. ln the industrial sector , Newfoundland's manufacturing industries enjoyed an improved competitive position because of the devalWltion of the dollar . The Province's two newsprint producers operated at full capacity as a consequence of this factor coupled with continuing strong market demand.

The capital investment in the Province was reinforced in 1978 by substantial private investment in the fiSheries and through renewed attention to exploration activities for onsho~ minerals and offshore oil and gu. In addition to these other developments, tbe previously disappointing situation in th.e Province's construction industry was significantly eased by accelerated Govemment expenditure, particularly on highways improvement. All of these trends are indicators of an overall improvement in the general economic climate of the Province throughout 1978 and this bas been reconfirmed in 1979 to date.

The favouzable Tefttlue ~ wu ~ly resultant from increased reveuue ftom the Gowrumeut of CaDada in respect of Tu Equalizatioa and Establ.iabed Programs FtDa~!Cini oa aa:ount of both 1978-79 aDd for prior years. This improvement in our ~ues more than offset the Del expmditure illc:rascs which 'lm'C su.bstantWly aarihucable to addkioaa.l granu paid to certain Government agencies and Crown Corporations. CapH.l Accu..t mel FUI:aldal Reqainmadl Total fi.aancial req!lin:ments, u shown in Tabte I. for 1978-79 reflect a very positive improvement of $22.400,000 o~r the approved estimates. 342

l I Outlook for 1979 The economy of Newfoundland is fll'IJl)y tied to the Canadian and world economies since most of our products are sold outside the Provi nce while the vast bulk of our consumer goods are imported . In any year, therefore, we must realize that Newfoundland's economic perlormance will be dependent in large measure upon events beyond our controL While soari ng energy costs have caused widespread imtabillty throughout the world. this is a fact of life for which the economies of all natiom and provinces must adjust.

In our own case, we can expect that, while imports will cost more, demand for our fish, forest products, and minerals should continue to be strong. Statistics for the first quarter of 1979 indicate that Newfoundland's economy is rapidly gaining further mome ntum , as can be demonstrated by a comparison with the first quaner of 1978: • The value of fish landings is up 25%. • The value of manufactured products shipped increased by 14.9%. • Tbe volume of iron ore mined increased by 39.3%. • Retail sales improved by 14.S%. • Employment increased by 5.3% or 8,300 new jobs on an aD.Ilualized basis.

It is anticipated that Newfoundland's economy wiU remain strong throughout 1979 and should demonstrate real growth of more tha.n 3.2%. Projections on investment intentioM indicate that new capital investment in the Province will be 29% greater this year than last, as a direct result of increased private sector investment in resource and manufacturing industries, coupled with an expansion in highway construction and thefurtherdev elopment of electrical generating facilities.

Government's extensive: efforts in promoting economic activity in the fishery, the energy sector , mineral exploration and industria l development are all key to the strong growtb in investor coolide nce which isagain being evidenced in 1979. This trend will be fun her strengthened by the initiatives of this new Government.

A more detailed review of cenain of the most critically cballenging components of tbis Province's economic futu re will serve: to reinforce the econo!Wc prospects to which 1 already referred. *DEVELOPMENT OVERVIEW Hydro Electric Stratec The energy future of the entire world has been altered significantly by the six-fold increase in oil prices over the lastsix years. Theavailahilityof anad~uate 343

energy supply and the stability of energy prices are fast becoming prime determinants in the economic health of all nations . Newfoundland is in a unique position to take advantage of the world energy crisis, not only in reprd to offshore petrolewn ~ources, but m.ore pan icularly by reason ofits proven hydro-<lectri<: resources. Never before has the re3liz.ation of this hydro-<lectric potencial been closer, and never before has it been such a critical factor in the future of our Province.

We intend to embark upon a positive, constn:ctive and bold initiative which will simultaneously confront the many challenges of hydro-<lectric development.

In short, our strategy embraces several important aims: • To obtain an in(eed of power from Labrador to ct..::: ~land portion of the Province from both the Upper and Lower Churchill sites. • To keep Newfoundland and Labrador Hydro on a sound fmancial footing so that it can continue to meet the electricity generation requirements of the Province. • To reduce the burden on taxpayers by renegotiating certain industrial power contracts. • To develop in an environmentally sound manner the remaining co-Island hydro-<lectric potential. • To reliAquish our reliance on oil-fired electrical generation in this Province before the cod of the next decade.

We do not wish to raise unreal expectations in tiW critical social and economic area. However, the achievement of substantially exclusive reliance on bydro-<lectric power will m.can the elimination of the major uncertainties associated with the supply and price of oil and will mean the availability of stably priced energy at a time when much of the Western world will be facing energy shortages a.nd staggering cost increases. The most important clements in our strategy will inextrica bly link four key compo nents: (

I) W c will aim towardsa renewed effort in renegotiat ions with the Province of Quebec regarding the Upper Churchill DevelopmeoL Governmem is presently involved in an intensive review of the lepl options. the need to have access to Churchill power :utd the ococssicy of cbanaing the contract price. There will be legaJ and financial complexities in any negotiations with Quebec, but it is inconceivable that the hydro-<lectric ~ources of the Churchill River will not be diverted to a greater benefit for our Province over the. next decade. Wit.b the overriding necessity for the rational developmen.t of Labrador po-r. mcluding the: JOint riven, the perceived 344

political barriers auodated with the Upper Churchill must be overcome. Hence, we will again examine the alternative of pursuing a meaningful dialogue and negotiation with Quebec as one of the available optioru.

(2) Government will continue to support the Lower Churchill Development Corporation to eruure a transmission link between Labradorand the Island. This transmission link will displace in large measure our dependence an oil for electrical generation and will meet future electrical demands well into the next century.

(3) Government will renegotiate the existing industriaJ contracts which are unacceptable in this day and age, particularly given the high level of subsidization which is a direct burden on the taxpayers of this Province. The present annual level of subsidization, Sl8,90C,COO is equivalent to one percentage point of the retail sales tax. We intend to deal firmly though reasonably with these major industrial customers, to return to the Province the economic rent which is due for our hydro-electric resources.

(4) Newfoundland and Labrador Hydro will proceed with the development of the Upper Salmon hydro potential provided it is established that the project is environmentally sound. Action to alleviate environmental concerns, particularly with regard to caribou, are of paramount importance and would receive priority attention if construction begiru. The total cost will be approximately $150,000,000 and this project, together with the completion of the Hinds Lake development and a third unit at Holyrood, will provide the Province with energy to meet demand to 1983.

Notwithstanding our great Hydro potential and Government's overriding d~ire to protect the consumer from rising electricity pri~. itisclearthatenergy wiU become even more expensive in the years ahead. Oil pri~ will increase as will construction costs. Consequently, it should be understood as well that even a Labrador infeed will not provide inexpensive electricity for the domestic consumer, though it will provide Jtaoly priced energy, allowing a Jignificant reduction in the rate of growth in electricity prices.

Government ha5 made Newfoundland and LabradorHydrosubject to public $CTUtiny through the Public Utilities Board and it is our belief that although energy prices will continue to rise, these incl'tlUe5 will not be unreasonable and when viewed agairut what I! happening in the world energy situation, Newfoundland's position will be comparatively favourable. Oil and Ga.s An unprecedented expansion in offshore petroleum exploration activiti~:~ is taking place in 1979. Seven rigJ will be operating in the offshore waters of the Province this year with as many as eleven wells to be drilled this year.

Several of the world's major oil companies are represented and it u estimated that they will be expending some S2JO,OOO,OOO. To appreciate the magnitude of this year's 345

investment, it can be compared to th,. total of S300,000,000 spent in the Province's wate~ fo r the entire twelve year period between 1966 and 1978. Rigorous application of the Province's petroleum regulations will result in the direct employment of some 750 Newfoundlanders. The requirement for the operators to give preference to local goods and services will provide125,000,000 in additiooal business to local industry and commerce m the Province which will generate many additiooaljobs .

Newf~und landers will also benefit from the money spent in the Province by the oil companies on education, training, research, and development. This major escalation in drilling activity in itself, is clear evidence that the prospects for Newfoundland's offshore energy resources have been greatly enhanced. In order to be certain that Newfoundland receives its rightful benefits from the exploration effort and from any subsequent disc:overies of oU a.nd gas, we must ensure that only one level of government is responsible for controlling offshore development- the Government of Newfoundland and Labrador.

To this end, we have insisted that the provincial regulations must be honoured. Furtherm ore:, the revenues whi.ch will flow to the Province whet~ production of oil c:omes on stream must be managed in a manner to create astrong economy for the long term benefit of our people.

This Governme nt will not tolerate an approach to our resources which would lead to the social and economic tragedy of ~boom and bust" development. ln keeping with the priority that Government is placing upon fiShery development, provincial expenditures in fisheries will be increased from S23,200,000 in 1978-79 to over SJU..SOO,OOO this year. To encourage rebuilding and modernization of the near and middle distance fiShing fleet. the funding for the Fisheries Loan Board will be raised to SS,OOO.OOO compared with SS,SOO,OOO in 1978-79.

This will mean that by the end o{ tlu.s fiseal year tlus agency will have provtded a total of over S53,000.000 lnsupport of our ftshinginduscry since 197S. Governmen t's comp re het~sive development strategy for the fiShery will be based upon the regeneration of the tisb stocks in the 200 mile management zone off our shores. We will continue the emphasis upon building marine service centers to foster the growth of a middle distance fleet through providing more adequate port and servicing facilities.

Another essential component of our fisheries policy is the development of the Primary Landing and Oi.stnbution Port strategy and we will be seeking FederaJ support for this project along with assistance for other fishing ports throughout tbe Province.

Fwther expansion of secondary processing is an essential element in our fisheries policy and is one of the areas with the greatest poten tial In order to stimulate further investment in this area, the program to assist ftsh proce330rs in the acquiring of modern secondary processmg equipment bas been ex-panded by raising the maximum level of GovernmeDt assistance from SSO,OOO to S lSO,OOO for project - a three fold inc:rea.se. 346

This Government is C{)mpletely convinced tbat if Newfoundland is to realize the full value of our fiSheries resource we must persuade our Federal colleagues to transfer additional responsjbilities for management of the fishery to the Province . We will strive for this grealer involvement in fusheries management at the provincial level, while always remembering the need to preserve the future of the resource in accordance with scientifically determined quotas. Industrial Recovery l would now lii:e tu touch on two particular inuu'~trial ventures whlch have been of gr1:at concern for several years.

Since the time of the last Budget wherein my predecessor expressed his confidence tharthe Linerboard Mill would be sold to the privaee sector, that event oftrcmendous economic importance to the future of the Province bas been successfully concluded . The Abitibi Company Limited hti already commenced to convert the mill to newsprint produ ction , at an expected cost of S80,000,000 with over 2SO Newfoundlatlders being employed during the conversion. Production at the mill is anticipated to commence in early 1981 and mill and wood-harvesting operations will directly employ approximately 700 Newfoundlanders.

It is heartcrung now to see th&t the S«ephenville area , in particular, has once again taken anew lease on lifewhilethe whole Province stands to benefit in the long run. With regard to the other venture. the rcflllCty at Come By Chance , negotiations with a potential purchaser are ongoing. Government has established the f1I111 position that the fmancial interests of the Province and the safeguarding of the health of .its people must be fully assured before reactivation receives the Province's support.

While the environmental impacts oft.he Refinery's opera tion are of utmost concern, the Government is also sensitive to the need for creating employment. lf the Re.finery should be re-activated, rehabilitation could commence in 1980aodstartupoccurearly in 1981. TheRefinerywouldoperateat 120,000 barrels per day and employ 300 people. This government pledges to proceed with the negotiations as expeditiously as possible and to lceep our people fully infonned of the status of negotiations in a frank and open manner .

Marine Industries With many of Newfoundland's vital industries being related to the ocean environment. it is critically important lbat thls Province become a world leader in ocean related knowledge, techniques and research and develo pment facilities. We have benefiCed greatly from our long established Fisheries CoDe~. and Memorial University will shortly be offering a program of Shlpbuilding Eogioeering including Naval Architecture and Marine Engineering.

Additionally, we hope to see an early commencement on the constructio n of a S3S,OOO,OOO "ice-tanlc" and Arctic vessel research facility, at Memorial University, funded by the National Research Counci l. Furthermore, in the area of tecb.nological development , tbe Province is expectiag very shortly to sign a new agreement with the Department of Regional and Economic Expansion for 347

the continued suppon ofN'ORDCO to enable that corporation to proceed with its initiatives in ocean science and technology. This government is seriously concerned about the operational and financial difficulties which Marystown Shipyards Litnited has uperienced over the last several years. Indeed, in the late stages of the 1978-79 fJ.SCal year the Province was required to advance $8,000,000 and has bad to provide a further $3,500,000 in this year's estimates to fund losses of the Shipyard. It must be clearly understood. that these levels of losses are totally unacceptable to this Government.

Notwithstanding the fact that the shipbuildi n& industry world wide is experiencing difficulty, this Government is determined to make the Marystown Shipyard a more viable operation. Accordingly, we have initiated an extensive review of the corporation's operations and objectives and we will be aggressively pursuing the matter in the coming months with whatever measures are WUTanted. While we are guardedly optirni.\tic that the yard can contribute to the Province's economy, this must be proven over time through the efforts of a prod ucti ve labour force, with strong management and improved financial results.

Otber De•elopnwtt Prospects While, it is not possible in this Speech. to review all of the developments in our diverse economy, it is extrem ely imponant tltat recognition be given to the econotnic development which has been directly nimulated lhrough joint funding arrangements with DR.EE. Revenues from development agreements with DREE covering tnitiatives in foresny, fisheries, agriculture. tounsm, ntral development. tnincrals, highway construcuon. industrial developmem and in particular.

Labrador development are forecasted to increase cons1derably this year. ln addition. this Government is negotiating a number of new development agreements which should be implemented later in the year. I should reiterate bere that this Government will press for an expanded program to upgrade the Trans Canada Highway together with an improvement in the existing cost-sharing arrangements.

While we are concerned about the temporary fr~ze which the Federal Go11emment has imposed on new CApital Projects we are confident that tbe new Federal CoUeagu~ · will be sensitive to the potential effects of this mea.sure on our Provinoe and will adjust its policy to minimize them. In

summary, the numerous economic prospects for the province are sound and encouraging. The integrated development plan which Government will formulate before the end of 1979 will clearly identify for Newfoundlanders and the business community, finn policy objectives which will const itut e this Government's vigorous development thrust to economic progress in the 1980's. FINANCIAL MAi'IJAGEMENT INITIATIVES Just as this Government stands committed to develop the Province to its fullest economic potential. we are without qu~tion, equally finn in our resolve to 348 •

maintain the financial integrity of the Province and to manage the affairs o( Govemmeut iu a fiDancially responsible and business-li.lce fashioo. Government's immediate financia1 plans and policies must be tailored to complement and support tbe economy as it develops. We cannot aford to permit desires and expectations to oversba.dow our capabilities to finance public services. We must deal with the pressures of infLation and inadequate revenue growth in a realistic manner, while curtailing growth in Government spending and by improving adminisuation and financial management.

The constraints of time since. this Administration took office have not allowed us to assess all the expenditure programs or to review adminis trative and financial management practices. Tbis Budget, as 1 ba ve stated, must be viewed as only the fust step towards tbis Administration's goals. The budgets of the 1980's, the iU"St of which is only a few months distant, will be structured to implement our plans.

Concum:ntly with creating the development plan, this Government will be undertaking extensive reviews of: • Revenue Sources. • Expenditure Programs. • Lending Activities.. • Administration and Financial Management . Rennue Sources Govemment is very concerned with the relatively high levels of ta.utioo in the Province and this Administration bas already pledged that there will be no iucreases in the retail sales tax, personal income ta.x, and $mall business corporate income tax rates. But restraint in the rates of taxation is not in it.self sufficie nt to secure our flnanc .ial objective.

To ensure tbat the taxation system of the Province is just and equitable, we will be undcrtakingacomplete review of the existingstructure as well as examining new and alternative sources of revenue. Special emphasis will be placed on there­ exami nation of taxation oftbe mining industry in the Province to assess whether we are receiving an equitable economic rent for our resources. As the Tbrooe Speech stated, we a.re determined to ensure therightfulreturnofdirect revenues to the province in this area of industrial activity .

We expect that further fiscal measures will be introduced once the review o( the provincial tax structures has been ~mpletcd. W""ttb the introduction of such measures, care will be taken to ensure that they are in harmony with the developmeut plan and Government's emphasis on culture, herita&e, continued 349

resource development and the improvement of living standards of aU Newfoundlande .rs. Expenditure Prop-ams In the light of the growing number of highly desirable new programs, the ("Cality of our financial position dictates the need to undertake reviews of existing ones in order that we may establish a meaningful

schedule of 11riorities to meet our objectives. This Government will immediately initiate reviews of all existing programs to identify and eliminate those: of low priority which can no longer be justified in the context of other more pressing needs. The educational system continues to the the most costly component of Government's expenditure commitments. It is logical therefore that this would be one of the sectors to receive immediate study.

Much work bas been done already in the area of educational finance and we are fortunate indeed, to have at band the ftllOrt of the Educational Finance Committee, and also the Report of the Task Force on Education, both of which will be of great assistance in aiding Government's review of educational funding. Of particular concern to Government is the capital fina.acing for school construction, to replace obsolete and in some cases, hazardous structures and to handle increased enrolments in particular areas.

We will also have to address tb.e overall issues of declining enrol ments , Grade 12, and their effect on classro om space. As a fi.I'St step in tbe reform of educational financing. I shall be detailing shortly that Government will this year implement certain recommendations of the Educational Finance Committee in respect of operating grants to .school boards. In addition, r will outline immediate steps to strengthen the capital grant structure. An equally pressing priority for financial review is the funding of our health care system.

With rapidly advancing b.ealth care expendit ures , it is becoming increasingly difficult to meet the current account obligations associated with the existing system. This makes it more difficult than ever to finance the much needed improvement and expansion of the system. It is also this Governme nt's view tb.at there may be inefficiencies and abuses within tl:le present system which should be eradicated. Accordingly, we intend to study very carefully the patterns of health expenditures and facility utiliution.

This Government stands com mitted to obtaining the maximum value for the funds spent on health care and to reViewing the most equitable means of fina ncmg our essential requirements. With these objectives clearly established we will conduct a thorough examination of tbe potential revenue raising options to finance health costs, and an indepth review of all rcalisVc control measures available to deter abuse that may exist.

Lanting Agencies The lending programs and agencies of the Province- the Newfoundland Municipal Financing Corporation; the Fisheries and Farm Development Loan Boards; the Rural Development .Autho rity; Newfoundland & Labrador 350

Development Corporation; and the secondary processing loan and deficiency guarantee progr.uns for the fishing industry - have been ~sponsive to meet our development needs and have expanded rapidly over the past several years. These activities will continue to be a key component in the Government's development plan. This Government will undertake a thorough review of these activities to ensu~ that they~sensitive to tbe p~sentday needs of the people and the busin«S community and to evaluate whether the current account expenditures, through interest subsidization and grants, are watTanted , and are cost effective.

W bile this review is being undertaken, Government has decided that tbe interest rate on new loans granted by the Fisheries and the Farm Development Loan Boards and the Rural DeveloJ)ment Authority will be increased to 6% which is still cheaper than alternative sources. AdmiDistrmoa ud Financial Maoacement One of tbe most important commitments in this Budget is our pledge to run the offices of Government in a fin.a.ncially responsible and administratively sound manner.

Taking into account the need to improve efficiency and management effectiveness , this Government will immediately embark: on: • A program to improve the effectiveness of program evaluation and to implement new budgeting techniques. • The development of a computerized accounting and fa.nancial management info rmation system to provide both Government and the departmental managers with timely accurate informauon .

These four assessments which I have just outlined, will we believe ensure that the Province's taXation structure is made more equitable; that e.xpendi ture programs and lending activities are fully responsive to our rieeds; and that the overall effectivenes s of Government wiU be greatly improved . CURRENTACCOUNTin9 Government's deliberations on current account have been particularly difficult in the face of many conflicting priorities.

While bard decisions had to be made in order to enable us to arrive at our financial goals, I can say witb all confidence that in budgeting fo r a contribution from current account to capital account of Sl0,800 ,000 this year, we have been successful in providing an expenditure plan which is realistic and financially 5ound. 351

!dDCadoa AJ I outlined previously, a major coocern with respect to cd~oaal fllWlc:ing bas centered around tbe method of ptOVlding operating graru.s to sc:hccl boards. The Provincially appointed Educational Finance Committee. comprised of rq~~ntatives of Government. Schoo l Boards. School Tax Authorities and the Denomia.ational Educational Commiuees, has thoroughly reviewal aDd reported upon openting cow, the adequacy of grazus aDd the role of the ~ authorities. Wbile we baye aot comp!cted a full assessment ofall the recomm~tiom iD the report.

I am pleased to aono~ that Oovemment bas agreed to aa:ept cmtain uy recommendatic:a desiped to allocate tbe fUDds available for scbool boards in a more equitable ID&DDCf . We propose therefore to implement the followiDa improvt:menu in t.be grant stniCtUrc in the 1979 scbool year. 352

• Equalization grants wiU be paid to scbool boards e:tperiencing declining enrolments and to boards which have lObus an above average number of students. • Funding for the elimination of standees on school buses which have to travel on bighways with speed limits above SO lcilometers per hour. • Supplementary grants will be paid to offset high operating costs in Labrador. • Payment of school tues for social assis tllllce recipients. • Supplementary grants to offset excessive beat and light being incur red by a number of boards.

During tne weeks ahead we will be discussing the manner in which the rct:ommendations will be implemented with the various agencies concerned . In assessing the financial requirements of Memorial University, Government reflected on the decision made in 1978 to increase the borrowing requirement for students seeking aid, and not wishing to impose a funber financial burden on the students, this year Government deeded not to increase tbe borrowing requirement funher. In addition, Gove rnment has asked the University to keep tuition fees at their current level with no increase this year.

Health and Socia l Services Over the past year, Government has initiated a concentrated effon to upgrade the standard of care provided in old age and nursing homes. This vitally essential area will continue to receive priority treatment through improvements in the quality of care and the level of safety provided in these institutions. Accordingly, Government funding of senior citizens homes will increase by almost 22% to $32,100,000.

As a funher step in this direction the Fores t Road facility vacated by the General Hospital is being adapted and upyaded to accommodate various aspects of care for senior citizens. ln keeping with Government's intent ion to improve the quality of li!e for the older generation, and the handicapped, funding has been provided to undertalc:e a new pilot project to determine the need for home support services for senior citizens and handicapped persons . Our social program will also be augmented this year by an expansion of the day care program.

Both of these initiatives are vitalfy imponant components of Government's social policy and will be expanded as our fina ncial resour~s permit. I am pleased to announce as weU that the level of funding provided for the maintenance of children has been greatly increased, reflecting the commitment to ensure an adequate quality or life for the children entrusted to our care:. The: rates paid to opentors of [oster homes have been insufficient 10 the past and wiU be revised upward by between 10% and 30%. to reflect more appropriately tbecosts of caring for these children .. 353

Social assistance rates have already been increas ed by 7% with effect from June 1st. However, notwithstanding tbe general increase, this Government recognizes the basic faet that no set of regulations and guidelines can adequately cover all the essential requirements of the needy. Thus, it gives me sreat pleasure to anno unce that Government bas set up a special needs fund to acco mmodate unforeseen problems and circumstances of social assistance recipients.

While these improved measures to fund the real needs of our people have been provided. a determined effort will also be undertaken to identify and eliminate u~s of abuse Ill tbe social assistanee program and modify programs m areas where costs are excessive. Governme nt will contin ue to fund Communi ty Develop ment Projects designed to take social assistance recipients off the welfare rolls and return them to gainful employm ent.

Housinc This Government is veey cognizant of the lag in residential construction and the vtrtuaJ inability of many low and middle income earners to fmance the purchase or construction of their own homes. Accordjngly , I am extremely pleased to a.nJlOunce that with effect from August 1st.. a new bome ownersh ip grant program will be introdllced to assist first tUlle buyers , Grants will be available to Newfoundland families with combined incomes of less than S20.000 and will range from SI.OOO to Sl.SOO dependant upon income.

Funding will be allocated during the llfe of this program to facilitate at least 1,400 new housing SUirts which will arcatc over 2,800 man years of employment in the the residential construction sector. It is our h ope that this new stimulus wiU shonly be complemented by the promised mortgage interest and property tax deducability program of the new Fede ral Government. Together these measures will constitute a double thrust to employment and home ownership.

Newfoundland and Labmor Arts Council This Gove mment has already annou nced its intentioq to place a renewed emphasis on the promotion and encouragement of the Ans in Newfoundland. Government feels very strongly tbat it is only thr ough the: development of a flourishing arts commun ity lhat the Newfoundland people will maintain into the future, an appreciation of the many facets of our culture and heritage wbich malces our Province such a refreshing place to which to live. Tbrougb the Arts We express the way in which we see ours elves as a people.

It is, therefore, app ropriate that Government should provide incentives in support of the local arts comm unity. I am very pleased to a.nJlOun<:e lb.at this Budget conta.in.s funding for the operating costs of a new Newfoundland and Labrador Arts Council Funds will also be made available to the Council to assist worthy individuals and groups, and to establish an Arts Fund which will serve a& an economic base for the 354

Council in the future, and will no doubt be augmented from time to time by ccntributions from various external sources .

Additional Buqeury lnitiatins 1 b.ave great pleasure in announcing the following additional initiatives which will, I am confident, prove to be beneficial in various public program areas: • An increase of 1% wjll be granted to pensionen with effect from August I, 1979. • Pensions will be granted to dependents of deceased civil servant pensioners who, under certain former pension legislation, were not entitled to such benefits. • Funding will be provided for a Provincial Advisory Council on the Status of Women . • A new Economic Council of Newfoundland and Labrador will be established with representatives from various secton of society and the different regions of the Province . • A revised abandoned vehicle program will be introduced to deal with this ongoing problem in an environmentall y sound man ner. • Additional funds will be made available to assist with the travel costs of sporta teams travelling between the Island and Labrador . ~nenJ Austerity Restraint in public spending

part icularly in relation to the management and operation of the public service will continue throughout this year and thl! years ahead . Only marginal increases have been permitted in expenditures for the maintenance and operation of public buildings and Government will intensify its energy conservation efforts in order to minimize the impact of escalati ng energy costs. Restraints b.ave alsd been imposed on the public relations and advenising activities of Government . The Special Action Group will be discontinued this yeu as will the Resource Public Relatious Program .

It is this Government's opinion tb.at these services can be provided more effectively by the resource departments . The growth rate in the size of the public service will be minimized and Goverument dcpanments and agencies will be direct ed to meet their program requirements from within their regular manpower allocation since the budgetary allocations for overtime and extra assistance bave been restrained and will be strictly controlled. Staff complements will be reduced where practical through attrition and norma! turnover . 355

Steps will be taken to eliminate low priority programsti 3JI example, the Hunter Training Program will be eliminated this year while the Hunter Tes~g Program will be retained. FISCAL MEASURES The pressures to maintain existing services and to provide expansion in certain essential programs coupled with the unavoidable reality of inflation, have again caused our expenditure growth to exceed the rate of escalation in our revenues. This growth pattern of expenditures must and will be curtailed as th.is Government COPlpletcs its evaluation of programs and pnorities in the coPling year.

In the years ahead it will no longer be acceptable to balance. the Budget in Newfoundland by imposing heavier taxation measures. This Government is determined to ensure that our commitment to freeze the rates of retail sales tax .• personal income tax, and stnall business corporate income tax is not violated. We are equally committed, however, to the achievement of a fiscally responsible position.

Accordingl y, it has been necessary to institute certain revenue generating measures to meet our financial targets. ln total, they will yield some $6,500.000 over the balance of this fiscal year. • The Tobacco Tax will be raised, effective immediately,by V.c per cigarette, or Sc per package of 20 cigarettes . A comparable increase will be applied to cigars and other tobacco products. This increase in Tobacco Tax is expected to yield $2,000,000, • the Insurance Companies Tax, which is presently 2o/o. bas been increased, effective immediately, to 3%.

It is estimated that this measure will generate an additional $770,000. • fees payable for motor vehicle regisuations and driver licenses are generally Lower than those in other provinces and have not been revised since 1975 . .Effec:Uve August lst. the passenger vehicle registration(~ will be increased by $10. This measure will produce S 1,40<:.000. An additional S900.000 will be obtained from varying increases apptie.d to commercial vehicle and motor cycle registrations aod other administrative cbarges. 356

• Presently, all other provinces impose an Aviation Fuel Tax. To conform with this practice, the Gasoline Tax base i.s to be extended to include a .7c per litre charge on aviation fuel. This tax w\U ooly apply to flWtts both commencmg and terminating in Nottb America. International flig!Us through Gander will not be subject to this tax. This measure is expected to gencJ;ate $600,000. • A 4% tax on all forms of media advertising will be implemented immediately. This will provide an estimated $750,000. Advertisements costing less than S20 or placed in publications of non-profit organizations will not be taxable.

I am pleased to announce, however, that Government has decided to introduce a number of new exemptions from reta.ilsales tax effective immediately. These measures are in keeping with the Government's emphasis on culture, education and safety: • Sale$ of bani-bound and soft cover books are no looser taxable. • Residential fire alarms, smoke detecton and cb.i.ldren's car safety seats are now exempt. • the exemption is raised fro m 19e to 2Sc. The overall net effect of tbe taJCJUioo changes which 1 am proposing will generate additional revenues tota.lli.ng approximately $6,000,000 in the 1979-80 f.I5Cal year.

CAPITAL ACCOUNT AND FINANCIAL REQlJIREMENTS The 1979-80 Capital Account Budget provides for expenditures totalliog $2531600,000. As in previous years, a substa ntial portion of our capital program continues to be funded on a joint basis with the Government of Canada through DREE, and special agreements including the Trans Canada ffighway Agreement .

When the Federal revenues arc reflected, along with the revenues which will be received this year from the Abitibi Company Limited in relation to the sale of the Stephenvill e mill, the net expenditure of tbe Province on capital account in this fucal year will be $147,400,000 357

Tbe prime component of tbi.c year's capital bwlpc it the extelllive program of hi&lnray improvemcsu ud development wbi.ch GoverDJDeDt has Wldc:rtakcn at a total COlt of o~ $94,000,000. Thil prOIJ&ID it already vay much iD propas and it providi.Dgadramatic stimulus to employment in the coost.ruction industry. I am vr:ry pleased to annowu:e that a new proanm will be laWKihcci this year which will rau1t iD reduced eiect:ric:ity rates and impro'ted sc:rvice to c~r:r.samen in certain rural collliiiUDities of the Province. Goya'DIDC1lt lw 358

authorized the Power Distribution Districts to proceed with the f111t phase of a new SIO,OOO,OOO program, to tie into the main Hydro grid certain commun!ties which are now serviced by diesel generation. This will prove to be a positive step forward which will provide the ultimate combination of a fundamentally sound, cost-<:ffective financial decision; with an improvement in service at r«<uced cost to the consumers.

In other words, while this investment will provide for increased efficiency and savings to the Power Distribution Districts, the consumen of electricity in those particular areas affected, will benefit from the program through lower energy prices and a more reliable electrical supply source. Government has provided 52,000,000 to cover the first phase of the program. Education In the education sector, it has become apparent to Government that steps must be taken to provide additional funding to upgrade those schools in the Province which are currently below acceptable safe ty standards.

As a preliminary step to providing for new schools over the next decade, I am pleased to announce that Government bas agreed to inc:reue the Schoo l Construction Grant to the Denominational Education Committees by $500,000 for each ofthe next eight yean. Government bas also decided to extend the grant structure beyond tbe present termination date. in order to meet the most critical needs of our school system.

In keeping with our previously stated intenti on of reviewing the capital fundin g of education, Government proposes to consult with representatives of the Denominationa l Eduation Committeesu soon as possible to discuss the specific capital projects which are deemed to be essential, 8Jld as well to examine the nature and term of the required extension to the grant. We also plan to explore wit.h the Denominational Education Committees alternative methods of capital financing for the future.

Government is pleased to see that Memorial University has successfully lllunched its fund raising campaign to finance the construction of the new Library 8Jld the School of Business and we are encouraged by the support wluch tbe campaign has received to date. Funding has again been provided in this year's estimates to enable Government to match the private contributions received for these very worthwhile projects.

Crown Corporations In addition to the stimulus provided to the economy through Government's own capital program, economic activity will be subst8Jltia11y augmented this year as a result of capital expenditures by crown corp orations ­ Newfoundland and Labrador Hydro, Newfoundland Municipal Financing Corporation. and the Newfoundland and Labrador Housing Corporation - totalling in excess of $140,000,000. Fidanci.al Requirements In the current fucaJ year, total financial rcqu.irementa will be $206,800,000 as compared to tbe revi.sed total financial requirement ofSI68,SOO,OOO for 1978- 79.

The requirement was reduced in 1978-79 due to various favourable variances previously outlined. Table IV summ.arizes the 1979-80 flllaDcial requirement. 359

The total financial requirements will be met from borrowings i.u tbe Ca01djan and Intenwional capital markets together with loans fro m the Canada Pension Plan and the Government of Canada. CONCLUSION: The 1979 Budget. while fmancially sound and realistic, is clearly an interim measure when viewed in the context of the policy objectives of this Administration. We have committed ounclves to a thoro ugh review and analysis of Government programs and fman .cial pn.ctices and we will meet these commitments in the moruhs ahead.

While there will be reforms i.u many areas, we must accept the fact that the fUI&ncial lio.itations of the province will not disappear overnight. Difficult deciaioas will be required- we will make til em and adhere to tbem. Our decisions will tlOt always be popular, but they will be realistic and responsible and we will stand behind t~. We will be openly fruit in establi.ahing our priorities and in explaiDina our policies to the people. The Budgets of the 1980's will clearly reflect the piAruled approach to development which is the key thrust in our economic policy objectives.

Our approach to development will invariably be predicated upo n the need to secure the long term prosperity of our people and the preservation of our heritage and the NewfounciWad way of life. To do any leu, would sacrifice the cultural identity and natural wealth with which we arc entrusted . In concluding this Budget Speech l can assure aU Newfoundlanders that they have every reaso11 to be confident that improved prosperity will be fonhcoming i.u the 1980's as our natural reso= wealth is reallz.:d 1h.rough a sound development strategy .

We must however , be realistic and temP" our immediate upir.uioas through endeavouring to understand more fully the prac:tial realities of the complex financial and C"c::onomic environment in wh.ich we live. 360

July 19, 1979 Tapes 147 and 148 NM - l On motion, deba~e adjourned until tomorrow, Friday. MR. SPEAXER (SimmS) : The hon. ~tinister of Finance. DR. J. COLLINS (Minister of Finance): Mr. Speaker, I beg to inform you that I have received a message from His Honour, the Administrator. MR.

SPEAKER: The following message is addressed to the hon. the Minister of Finance: "I, the Adminis ·tra tor of the Province of Newfoundland, transmit estimates required for the public service of the Province fo r the year ending the 31s t. day of ~rch 1980, in the aggregate of $1,213,567,700 and in accordance with the provisions of the British North America Act of 1867, as amended, I recommend these estimates to the House of Assembl y. MR. SPEAKER: (Sgd) R. s. Furlong, Administrator." The bon. the Minister of Finane~. OR. J. COLLINS (Minister of Finance): Mr.

Speake r, I move that ais Honour's gracious message, together with the estimates, be referred to a Committee of supply. On motion that the House resolve itself into Committee of Supply , !1r. Speaker left the Chair. MR. CHAI:RMAN (Blltt) : Order, please! On 1110tion that the Committee rise, report progres s and ask leave to sit again, Mr. Speaker returned to the Chair. MR. SPEAl<ER: The hon. the member for Conception Bay South. MR. CHAIRMAN: Mr. Speaker, the Committee of Supply have considered the mattect:s to them referred, have directed me to report progress and ask leave to sit again.

On motion report received and adopted Committee ordered to sit again on tomorrow. 361

July 19, 1979 MR. SPEAKER: (Si=

s) OR. J. COLLINS: Tapes 147 and 148 EC - 2 The bon. the .Minister of Fi.Da.nce. Mr. Spealcer, I move that the House resolve itself into a Committee of the ~~ole to consider certain resolutions relating to the imposition of a tax on tobacco. Mr. Speaker, I aLso move that the House resolve itself into a Committee of the Whole to consider certain resolutions relating to the .imposition of a tax on insw;ance companies . Mr. Speaker, t also move that the Rouse resolve itself into a Committee of the Whole to conside r certain resolutions relating eo the imposition of a tax on retail sales. !olr .

Speaker, I also move that the Rouse resolve i.tself into a Commi.ttee of the Whole to consider certain resolutions relating eo the imposition of a tax on gasoline. Mr. Speaker, I mave ehat ehe Bouse resolve itself into a Committee of the Whole to consider certaiD resolutions relating to the imposition of a tax on advertising. MR. ROBERTS: noted as sucn. MR. SPEAKER: Notices. OR. J. COLLINS: Motion. MR. ROBERTS: t.he table. MR. SPEAKER: (Inaudible) not be moved as such or Order, please ! It is my understanding that these are Mr. Speaker, they a.re Notices of Here we ue. Here we are.

One for A request has been made to take a 1110111ent to distribute the Estimates. MR. ROBERTS: I mean, the whole point of going into COIIIIIittee was eo table them, Mr. Spea.lter. MR. SPEAKER: OR. J. COLLINS : Order, please! The bon. the Minister of Finance. l-lr. Speaker, if ther-e is any doubt about the procedure perhaps I would be pe.rmi tted to table the Estimates. 362

July 19, 1979 Tapes l47 ~d l48 GC - 3 MR. ~masmu.L: through it together. MR. ROBERTS: They are tabled now. We will get None o~ us want to be difficult, 'Bill' , but the Estimates still have not been tabled. Could we have the Estimates tabled, please? MR. SPEAKER: (Silllm.

s) MR. ROBERTS: since 10:00 this morning. MR. SPEAXER: MR. MARSHALL: 1 me.an, these are salluy details. Order, please! I Jaean, the press has had them The bon. the President of the Council . I move that the Bouse at its rising do adjourn until to!norrow, FridAy, at 10:00 A.!i. and chat this Bouse do now adjourn. MR. SPEAKER: It is moved and seconded that this Bodse do now adjourn. Is it the plea.=e of the Rouse to adopt t:he motion? MR. ROaER!l'S: Mr. speaker, I do not intend to disagree. I silllply want to ask if the Bouse Leadar wollld indicate the business that the qoverDlllellt intend to call tomorrow. MR.

SPEAXER: MR. MARSHALL: The hen. the President of the Council. Mr. Speaker, what - intend to do tomorrow is to proceed into tbe consideration of the amendment to the standing Orders and then whatever tiJne, if any, is left, we will then be getting into the Addre._ss in Repl.y. MR. SPEAKER! Those in favour of the motion, 'Aye', con=ary, 'Nay', carried. This Bouse stands adjourned until to~rrow at 10:00 A.M. 363